How HS2 (and major projects) became unrecognisable. And other tales of budgetary mismanagement.

A 2009 document by the UK’s rail owner and infrastructure managing body, Network Rail, both compared the UK’s small high speed network to other countries’ and laid out proposals to expand it. Out of that document came HS2 – a high speed train line (it says so on the tin!) from London to the north of England. The name was catchy enough that it’s now a stand-in for a whole host of associated projects. But the original project was the Y-shaped railway from London to Birmingham, splitting into a branch to Manchester and one to Leeds. Let’s unpack that.

Photo by Paul IJsendoorn from Pexels

The UK’s High Speed network before HS2

In 2009, the UK only had the 67 mile-long HS1 from London to the Channel Tunnel as its true high speed line. There are upgraded lines, such as the East Coast Main Line from London to Edinburgh, that operate at 120 to 140 mph (190-220kph), that bridge the gap between standard rail and high speed. In the government’s strategy until 2009, those speeds and lines were good for everything under 500 miles. In short, if you wanted to go anywhere except London to Edinburgh or Scotland, take the train. Glasgow, Edinburgh and Aberdeen, take a plane. Northern Ireland sold separately.

Except with the rise of China’s microwave rail network, sprung up from several miles of track connecting Shanghai to its airport to thousands of miles of track capable of 300mph, the UK had a case of high-speed-rail-envy. 

The idea behind HS2 was the UK’s most populated metro areas – London, Manchester, Birmingham, Sheffield and Leeds, could all be connected by a Y-shaped rail line running at around 340 miles. The UK government has long set rebalancing the North-South economic and industrial divide (see Northern Powerhouse) and HS2 is seen as a tool to help with this.

Ok, those are the facts. Why was it so badly wanted and how did it seem like a good plan?

In 2008-2009, there was widespread opposition to some of the solutions to congestion, especially adding a new runway to Heathrow, congestion charges in London and tolls across the country (the fierce opposition to tolls on the Humber bridge is legendary). A number of reports had been commissioned, including Sir Rod Eddington’s in 2006. The 2006 report went against high speed rail, instead suggesting improving existing track and bus routes (more on this later), but despite press coverage, it was filed away and in 2009, the Labour government took the first steps towards HS2. The original plan had the tracks run through mostly Conservative constituencies.

Interestingly, the Conservative government starting in 2010 continued with the project. Even more interestingly, they left the original plan as it was – still running through their own constituencies. But by far the most useful piece of information about HS2 is Phillip Hammond’s (then-Transport Secretary) comment about HS2: 

“If we used financial accounting we would never have any public spending, we would build nothing and we would have no public services. We have to judge investing in projects like HS2, or schools and the health service, by the benefits they bring to society as a whole. Financial accounting would strike a dagger through the whole case for public sector investment.”

Setting aside politics and fiscal policy, this can be seen as the guiding light of the entire project. 

The arguments against

The opponents of HS2 rely on two chief arguments – it’s expensive and the public wasn’t properly consulted. These are usually the arguments against public spending on big-ticket items. 

The cost argument is often ‘money better spent on something else’. While this is an intuitive argument at the personal finance level when you’re deciding between a sports car and a lawnmower, government budgets are nothing like household budgets. 

The other cost issue is based on the assumption that HS2 is a luxury item. If you have a car, that might be true. If you take the train and commute from Birmingham to London (housing crisis much?) or go between two or more of the large cities in the North of England, HS2 is a lot more appealing. Where I do agree with the argument is that it is unequal. In the sense that it focuses on the biggest cities. While it is only natural, since the bigger the metro area, the more it brings to the economy, there are certain amplification effects when it comes to London and its inescapable economic pull within about 40 miles, even beyond the green belt and the M25. The connection between Birmingham, Manchester, Sheffield and Leeds is perhaps the less contentious part of HS2, but where the ‘money better spent’ argument makes sense is around Manchester and Leeds in particular. Those two cities of about half a million each (metro areas) are poorly connected, with the main line between them still not fully electrified. 

The public consultation argument is based primarily on NIMBYism (not necessarily a bad thing if you have a loud rail line going close enough to your house) and the failure of the 2010-11 round of public consultation. Arguably, this was the main catalyst for the StopHS2, AGAHST and other anti-HS2 organisations.

There is a third argument against it, but it has arisen much more recently, once construction started – the environmental argument.

Personal opinion warning: I believe the government has set its sights on high speed rail and wanted it so badly, whether to help balance the economy or reduce load on existing transport networks, that it steamrolled through arguments against the project. Now that the project is underway a sunken-cost mentality and the incumbent contracts prevent an easy roll-back. 

How did it get so expensive?

The proposed cost of phase I (London to Birmingham) was 36 billion GBP in 2015, with another 20 billion expected for the second phase connecting the two arms of the Y-shape. 

A key criticism levelled at HS2 (and transport projects in general) is that they damage the environment. While a part of that is inevitable, the key to minimising the damage is surveying the planned route in advance of setting any plans in stone. HS2 has a high bar to clear – it runs through some of the densest populated land in Europe, ancient woodlands, protected landscape, viaducts, rivers and once again, populated areas. The decision to run the line to city centres may make transit easier but dramatically increases construction costs. More money has to be dedicated to buying out land, compensating neighbours and demolishing existing homes. About 400 homes will be demolished in London.

Additionally, the line has to be laid in cuttings: flattened ground surrounded by two banks of raised land. The aim of this is to reduce noise and impact on surrounding life. 

Finally, the route involves moving the course of a river (River Tame) and building a viaduct over a valley. 

All that figured into the original 2015 price tag of 50-ish billion (earlier on it was even more underestimated), but in the 2015-2016 survey there were some glaring errors. Here’s a truncated list:

  1. The property values weren’t even fully assesses – many properties were not assigned values
  2. The initial estimate was lower because of expected efficiency savings that didn’t materialise (synergies in large projects rarely ever materialise)
  3. The original plan involved fewer trains (because there wasn’t as much of an expectation of paying back the cost (and ironically because cost was lower). To pay back more money you need more ticket-buyers and more room on the trains – therefore the 18 trains an hour requirement. To have 18 trains an hour you need to make adjustments to the stations and tracks which drives cost up.
  4. The surveys even in 2015 weren’t complete. As of late 2014, about 40% of the planned route hadn’t been surveyed or assessed for environmental impact. (This remains an issue as the Birmingham to the North routes still haven’t been evaluated, meaning the cost for those sections is still airy-fairy)

An interesting project to compare would’ve been the Olympics or the EuroTunnel. Both faced similar property and surveying challenges and ended up between 250 and 300% higher in final cost than the original budget.

Where does that leave HS2?

The project is going forward, approved just before the coronavirus hit Europe and lockdowns were implemented. Even amid the lockdown, construction was given the go-ahead to resume (the implications of this are a whole other kettle of fish).

The first train won’t run on the finished tracks from London to Birmingham until at least 2026. While I can’t help but admire long term thinking in the political class (the project started in 2009 and will likely run til the 2040s, which apart from the original railway construction in the 19th century might become Britain’s longest running national project), the problem HS2 was designed to mitigate: either economic inequality between the North and South or railway overload, depending on your persuasion, needs a more immediate solution.

Photo by Essow Kedelina from Pexels

In the North, the overload has been partially managed with a 5bn increase in local bus route funding from the London central government. Study after study shows bus route availability is more flexible and does more good economically than rail journey. You can also electrify buses easier and faster than gas-turbine or diesel-powered locomotives. 

The Huddersfield line between Leeds and Manchester-Liverpool is scheduled to be finished electrification in 2022 (although even then it won’t be 100% electrified). This, together with a corridor linking Sheffield/Derby to Manchester would help too.

You might notice there’s little in the way of support for longer distance railways – the original assumption that you can take a plane if you want to go to Scotland still stands. This may change in the wake of the net-zero-carbon emissions requirements springing up and who knows how the airlines industry will look after the lockdowns subside, but with the upgraded East Coast Main Line in place, there’s little reason for further investment from government’s point of view. 

In fact, I believe HS2’s major selling point was the increased connectivity across the UK, rather than the productivity (which the government emphasised time and time again). 

The conclusion and key takeaways

The project will bring lots of jobs. The construction has started. The deed is pretty much done, whether you backed it since the beginning or opposed it because it does too much damage to justify it. On one hand some of these communities and cities were starved for funding and infrastructure improvements after years of austerity. On the other hand, nearly 100 billion can buy a lot of things that might deliver more specific improvements to quality of life.

The Oakervee Review in 2019 brought out many skeletons from the project’s now-decade of life.

What can we learn from HS2?

I’d lay out the following: never underestimate the ability to undervalue a project’s final cost and its ability to sprawl and become all things for all people (see the F-35 plane in the US, Microsoft Excel as a product and almost every large project ever – public OR private), ‘Where there is will, there is a way.’ also translates into a myopic approach to alternatives, when there may be simpler solutions that aren’t as sparkly (bus route provision rather than high-tech trains) and finally that the longer the time horizon of a project the more room for error in forecasting its cost (not just because of interest amounting on interest).

The longer the project (and few are longer than 30-odd years), the more need for a project management structure that outlasts the starting team. Part of me hopes HS2 will get better after the recent review and future projects can learn from it. However, few would’ve predicted the rise in home working (and the surge in the coronavirus crisis) and the argument for HS2 (the project not the spending!) looks more fragile with every office cancelling its lease.

References:

  1. The government’s outline supporting HS2 from 2019: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/69801/hs2-a-catalyst-for-high-speed-britain.pdf
  2. Sir Rod Eddington’s 2006 report: https://webarchive.nationalarchives.gov.uk/20081230093524/http://www.dft.gov.uk/about/strategy/transportstrategy/eddingtonstudy/
  3. The Northern Powerhouse and the hypothetical improvements to the northern transport network (esp. between Liverpool, Manchester and Leeds): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/427339/the-northern-powerhouse-tagged.pdf 
  4. The following factsheet outlines the Northern Powerhouse project: https://www.centreforcities.org/wp-content/uploads/2015/06/15-06-01-Northern-Powerhouse-Factsheet.pdf
  5. Stop HS2: http://stophs2.org/
  6. 15bn plan to create HS North : https://www.bbc.co.uk/news/uk-28654134
  7. Parliament’s assessment of HS2’s environmental impact mitigation efforts: https://publications.parliament.uk/pa/cm201314/cmselect/cmenvaud/1076/1076.pdf
  8. 5 billion for buses and bike lanes: https://www.bbc.co.uk/news/uk-politics-51453457
  9. A blog piece about the EuroTunnel and its similar experience running over budget and going bankrupt at one point: https://johnredwoodsdiary.com/2018/01/21/the-channel-tunnel-has-proved-to-be-an-expensive-and-disappointing-investment/
  10. Oakervee review: https://www.gov.uk/government/publications/oakervee-review-of-hs2
  11. Suggestions on how HS2 could’ve been better managed: https://www.apm.org.uk/blog/hs2-is-going-ahead-here-are-the-lessons-it-needs-to-learn/

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